Full Cost and Thier Uses
Full Costs and their Uses
Cost
is a measurement, in monetary terms the amount of resources used for some purpose may be defined as a sacrifice or giving up of resources for a particular purpose. are frequently measured by the monetary units that must be paid for goods and services.
Three Important Ideas for Costs
1.Cost measures the use of resources.
*The cost elements of producing a tangible good or intangible services are physical quantities of materials, hours of labor service and quantities of other resources were used.
*Cost measures how many or how much, of these resources were used.
2.Most measurements are expressed in monetary terms.
*money provides a common denominator that permits the amounts of individual resources, each measured into its own scale, to be combined so that the total amount of all resources used can be determined.
Ex. Five pounds of material and one hour of labor cannot be added together to produce a meaningful total; but if the amounts are converted to money at, say $2 per pound for material and $17 per hour for labor, they can be added to produce a total cost of $27.
3.Cost measurement always relates to a purpose.
Ex. products, departments, projects, or any other thing or activity for which a monetary measurement of resources used is desired.
Cost object/ive
-is the technical name for the product, project, organizational unit or other activity or purpose for which costs are measured.
Cost Accounting System
-routinely collects costs and assigns them to cost objects.
Full Cost
-all the resources used for a cost object
-is (1) the sum of the cost object’s direct costs (the costs that are directly traced to it) and (2) a fair share of the indirect costs (those costs incurred jointly for several cost objects)
Ex. Ms. Chen paid $35 for a pair of jeans at a store. $35 is the full cost because $35 of her resources was used to acquire a pair of jeans.
Note: The full cost of a cost object is the sum of its direct
Cost
is a measurement, in monetary terms the amount of resources used for some purpose may be defined as a sacrifice or giving up of resources for a particular purpose. are frequently measured by the monetary units that must be paid for goods and services.
Three Important Ideas for Costs
1.Cost measures the use of resources.
*The cost elements of producing a tangible good or intangible services are physical quantities of materials, hours of labor service and quantities of other resources were used.
*Cost measures how many or how much, of these resources were used.
2.Most measurements are expressed in monetary terms.
*money provides a common denominator that permits the amounts of individual resources, each measured into its own scale, to be combined so that the total amount of all resources used can be determined.
Ex. Five pounds of material and one hour of labor cannot be added together to produce a meaningful total; but if the amounts are converted to money at, say $2 per pound for material and $17 per hour for labor, they can be added to produce a total cost of $27.
3.Cost measurement always relates to a purpose.
Ex. products, departments, projects, or any other thing or activity for which a monetary measurement of resources used is desired.
Cost object/ive
-is the technical name for the product, project, organizational unit or other activity or purpose for which costs are measured.
Cost Accounting System
-routinely collects costs and assigns them to cost objects.
Full Cost
-all the resources used for a cost object
-is (1) the sum of the cost object’s direct costs (the costs that are directly traced to it) and (2) a fair share of the indirect costs (those costs incurred jointly for several cost objects)
Ex. Ms. Chen paid $35 for a pair of jeans at a store. $35 is the full cost because $35 of her resources was used to acquire a pair of jeans.
Note: The full cost of a cost object is the sum of its direct